Keywords Studios on acquisition spree with its 10th acquisition of the year, VMC Consulting for $66 million

In October 2017 Keywords Studios Plc (LSE: KWS), an international technical service provider to the global games industry, made its 10th acquisition this year and its largest deal to-date with the stock purchase of VMC group, including VMC Consulting and Volt Canada Inc., in an all cash deal worth $66.4 million. Besides adjustment for working capital at closing, the deal is on a debt-free, cash-free basis and will be funded with the issue of new Keywords ordinary shares, worth approximately $100 million. In addition, Keywords placed $0.5 million into escrow as upfront deposit, which the seller will be entitled to retain upon termination of the purchase agreement, subject to certain conditions. At closing, parties will also enter into a Transition Services Agreement to facilitate operational continuity, and an Indirect Staffing Agreement with Volt.

The transaction was done at approximately 1.2 revenue multiple and 10.4 EBITDA multiple. With many cross-selling, roll-out opportunities, the cost savings are estimated to be $1.5 million in the first year and a further $1.0 million in the second year of ownership.

Since going public in 2013 and given the strategy to consolidate the fragmented video games market, Keywords’ other recent acquisitions include d3t, GameSim, Marque Rose, Dune Sound, Around the Word, Asrec, Red Hot CG, Player Research, Spov, and XLOC.

Founded in 1999, VMC group (formerly Volt Management Consulting), a division of publicly-listed staffing company Volt Information Sciences, Inc. (NYSE:VISI), provides QA testing, localization services, data analytics, development and customer support services to several industries including video gaming, mobile, Internet of Things (IoT), sports, streaming, and hardware laboratories. In addition, VMC provides client site-based Embedded Technical Services and manages crowd-based testing of games through its ‘Global Beta Test Network’ (GBTN). VMC employs about 1,300 employees from its two principal locations at Redmond, Washington and Montreal, Canada.

Keywords Studios’ CEO, Andrew Day said “VMC is an organization we’ve admired for several years for its reputation, scale and high-quality service as well as its attractive embedded technical services and crowd-based testing services.”

About PierCap Partners:

We are a mergers and acquisitions (M&A) investment bank based in San Diego. M&A is our singular focus. Whether you are thinking of acquiring / selling a business, or taking some chips off the table, we run a well-disciplined process that secures best possible value, minimizes disruption and manages the delicate balance and spirit of collaboration. With over $2 billion in aggregate transaction value and 35+ years of combined experience, our leaders bring operational expertise, an owner’s perspective, and Wall Street solutions to you. Find out more about our focus, services and experience.

Insights

Each month, in our M&A Snapshots newsletter, we dig deeper into the latest market data in order to identify trends and provide context, to separate what’s meaningful from what’s just background noise. »View Insights